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FCC Releases Notice of Proposed Rule Making Regarding Commerical Leased Access and Program Carriage Rules

June 18, 2007   

Last year, in connection with its approval of the Time Warner/Comcast/Adelphia transactions, the FCC indicated its intent to initiate a review of its rules implementing the leased commercial access (Section 612) and program carriage (Section 616) provisions of the Cable Act.  The FCC has finally released the promised notice of proposed rulemaking (“NPRM”).

1. LEASED ACCESS 

 Section 612 of the Act requires that a cable operator set aside a percentage of its channel capacity for lease by unaffiliated video programmers.   As mandated by amendments to Section 612 adopted in 1992, the FCC has established a formula (based on the “average implicit fee” that other programmers are charged for carriage) for determining the maximum lease rate that an operator can charge for use of the designated capacity.  

The NPRM seeks comment on how leased access is working: to what extent are programmers leasing capacity on a full or part-time basis; how many channels are available; for what purposes are the channels used; how do the terms in leased access agreements differ from the terms in carriage agreements with other programmers?  The NPRM also asks about the effectiveness of leased access enforcement, including the costs associated with bringing complaints, whether a more expedited process is needed, and whether modifications should be made to the rate formula. (Commissioner Adelstein, in a separate statement, expressed particular interest in the issue of whether the programmers are being offered a “reasonable, justifiable rate”).  Another issue raised in the NPRM concerns the impact of the transition to digital technology on the calculation of a cable operator’s channel capacity and channel count for purposes of determining the operator’s leased access set aside and/or maximum leased rate.  Finally, the NPRM asks whether the rules should be amended to allow leased access programmers to request carriage on a specific tier, such as a “family tier” and whether the leased access rules should apply to video-on-demand or other technologies that “do not fit a traditional ‘tier’.” 

2. PROGRAM CARRIAGE

As mandated by Section 616 of the Act, the FCC has adopted rules governing program carriage agreements between multichannel video programmers (“MVPDs”) and video programming vendors.  These rules prohibit an MVPD from requiring a programmer to give the MVPD a financial stake in the programmer as a condition of carriage; coercing a programmer to give the MVPD “exclusive” carriage rights; or discriminating against a programmer with respect to carriage or the terms and conditions of carriage on the basis of the programmer’s ownership affiliation or non-affiliation with the MVPD.  The FCC also has adopted rules and procedures for reviewing program carriage complaints.  These rules include procedures for using “alternative dispute resolution” or a hearing before an Administrative Law Judge to resolve factual disputes. 

The NPRM seeks comment on whether any of the processes for resolving program carriage disputes should be modified.  For example, the FCC asks whether the elements that make up a “prima facie” case of a violation of the rules should be clarified.  The NPRM also asks whether it should adopt a specific timeline for the resolution of program carriage complaints and whether additional rules are needed to protect programmers from retaliation if they file a complaint and/or to address frivolous complaints.  Finally, the NPRM raises the question of whether the rules should be amended to require multiple system cable operators to negotiate national carriage agreements rather than system-by-system agreements.

3. ARBITRATION

In addition to the issues specific to the leased access and program carriage rules, the NPRM seeks comment on an issue of common interest to both sets of rules: the use of arbitration procedures to resolve disputes.  The FCC seeks input on whether it should establish arbitration procedures and, if so, what those procedures should be.  For example, should arbitration be elective or mandatory, who should bear the costs of arbitration, and what standard of review should the FCC use to review an arbitrator’s decision?

Comments in response to the NPRM will be due 45 days from the publication of the NPRM in the Federal Register; reply comments will be due 20 days after the initial comment deadline.

We would be pleased to respond to any questions regarding this matter.                                   

 

 

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